Company Overview - The J. M. Smucker Company (NYSE: SJM) is known for its iconic American food brands, including Jif, Folgers, Smucker's, and Uncrustables [1] - The company is expanding its growth potential through recent acquisitions, notably Hostess Brands, which is recognized for its snack products [1] Analyst Background - The analyst has over 10 years of experience researching companies across various sectors, including commodities and technology [1] - The analyst has researched more than 1000 companies and has transitioned from writing a blog to creating a value investing-focused YouTube channel [1] - The analyst expresses a particular interest in metals and mining stocks, while also being comfortable with consumer discretionary/staples, REITs, and utilities [1]

Financial Data and Key Metrics Changes - The company delivered positive results in fiscal year 2025, reflecting top line growth supported by strong consumer demand and bottom line growth driven by disciplined cost management [2][3] - Approximately $700 million of debt was repaid in fiscal year 2025, with plans to pay down an additional $500 million in each of the next two fiscal years [17] Business Line Data and Key Metrics Changes - The company is focusing on key growth platforms including Uncrustables, Cafe Bustelo, Meow Mix, Milk Bone, and Hostess Brands to drive organic growth [3][4] - A comprehensive plan is being executed to stabilize the Hostess brand and return it to growth [3] Market Data and Key Metrics Changes - The company remains well positioned to navigate dynamic input costs, including green coffee volatility, through its strong portfolio [4] - Approximately 90% of U.S. homes have a product from the company's portfolio, indicating a strong market presence [14] Company Strategy and Development Direction - The company is amplifying successful strategies and evolving its approach where needed, with a focus on driving organic growth and embedding a transformation mindset [3] - There is a commitment to consumer-led innovation and leveraging data and insights to anticipate consumer needs [4] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and the strength of its brand portfolio, anticipating continued growth and shareholder value [4][24] - The external environment is expected to remain dynamic, but the company is excited about future opportunities [4] Other Important Information - The company recognized the retirement of board member Alex Schumate, highlighting his contributions over 16 years [5] - The annual meeting included voting on three management proposals, all of which were approved by shareholders [11][12] Q&A Session Summary Question: When do you anticipate the Hostess debt will be repaid? - The company plans to pay down approximately $500 million of debt annually in each of the next two fiscal years, aiming for a leverage ratio at or below three times net debt to adjusted EBITDA by the end of fiscal year 2027 [17] Question: How do you manage hyper politicization of publicly traded corporations? - The company approaches each decision with responsibility, considering alignment with values and potential for positive change, prioritizing the needs of consumers and shareholders [18][19] Question: What effect will global tariffs have on the company? - The company is monitoring trade policy and tariffs, particularly regarding coffee, which cannot be grown in the U.S., and anticipates a 25% adjusted earnings per share impact for fiscal year 2026 due to tariffs [20][21] Question: Did my shares count in the voting? - All shares are treated equally for voting purposes, as the company stopped differentiating long-term shares in 2022 [22]

Financial Data and Key Metrics Changes - The company delivered positive results in FY 2025, reflecting top line growth supported by strong consumer demand and bottom line growth driven by disciplined cost management [2][3] - Approximately $700 million of debt was repaid in FY 2025, with plans to pay down an additional $500 million in each of the next two fiscal years [17] Business Line Data and Key Metrics Changes - The company is focusing on key growth platforms including Uncrustables, Cafe Bustelo, Meow Mix, Milk Bone, and Hostess Brands to drive organic growth [3][4] - A comprehensive plan is being executed to stabilize the Hostess brand and return it to growth [3] Market Data and Key Metrics Changes - The company remains well positioned to navigate dynamic input costs, including green coffee volatility, through its strong portfolio [4] - Approximately 90% of U.S. homes have a product from the company's portfolio, indicating a strong market presence [14] Company Strategy and Development Direction - The company is amplifying successful strategies and evolving its approach where necessary, with a focus on driving organic growth and embedding a transformation mindset [3] - There is a commitment to consumer-led innovation and leveraging data and insights to anticipate consumer needs [4] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a dynamic environment and highlighted the strength of its brand portfolio [4] - The company anticipates a leverage ratio at or below three times net debt to adjusted EBITDA by the end of FY 2027, providing financial flexibility for capital deployment [17] Other Important Information - Alex Schumate, a long-serving board member, is retiring, and his contributions were acknowledged [5][6] - The company plans to publicly announce final voting results on or before August 19, 2025 [12] Q&A Session Summary Question: When do you anticipate the Hostess debt will be repaid? - The company plans to pay down approximately $500 million of debt annually in each of the next two fiscal years, aiming for a leverage ratio at or below three times net debt to adjusted EBITDA by the end of FY 2027 [17] Question: How do you manage issues related to the hyper politicization of publicly traded corporations? - The company approaches each decision with responsibility, considering alignment with values and potential for positive change, while prioritizing business operations and stakeholder interests [18][19] Question: What effect will global tariffs have on the company? - The company is monitoring trade policy and tariffs, particularly regarding coffee, which cannot be grown in the U.S., and anticipates a 25% adjusted earnings per share impact for FY 2026 due to tariffs [20][21] Question: Did my shares count in the voting? - All shares are treated equally for voting purposes, as the company stopped treating long-term shares differently in 2022 [22][23]

Core Insights - Food companies are facing increased price sensitivity, uneven volume trends, and challenges to brand loyalty as consumers seek value [1] - Companies that can protect margins, manage input costs, and adapt to changing consumption habits are likely to succeed [1] The J. M. Smucker Company (SJM) - SJM is undergoing a strategic transformation, focusing on portfolio optimization through acquisitions and divestitures, including the acquisition of Hostess Brands in late 2023 [3][4] - The Hostess acquisition enhances SJM's position in the snacking category, with a 3% year-over-year sales increase in its International and Away From Home segment [4] - Despite growth, SJM's adjusted gross profit declined by 9% year-over-year in the fiscal fourth quarter due to higher input costs and weaker volume [5] - SJM is increasing marketing investments for key brands, leading to a 3% rise in selling, distribution, and administrative expenses [6] Post Holdings, Inc. (POST) - POST is strengthening its position through consistent performance, with Foodservice segment net sales rising 9.6% year-over-year to $607.9 million in Q2 fiscal 2025 [7] - Strategic pricing actions have allowed POST to protect margins amid inflation, offsetting input cost inflation and volume softness [8][9] - POST's recent acquisitions, including 8th Avenue Food & Provisions and Potato Products of Idaho, support a diversified growth strategy [10] - POST benefits from a well-diversified portfolio and disciplined execution, positioning it as a resilient player in the food industry [11] Financial Comparisons - The Zacks Consensus Estimate for POST's fiscal 2025 EPS is $6.63, while SJM's estimate has decreased by 4% to $9.28 [12] - POST trades at a forward P/E of 14.54x compared to SJM's 11.1x, reflecting stronger earnings momentum for POST [13] - In the past three months, POST's stock has declined by 6.9%, outperforming SJM's 8.8% drop, justifying the valuation gap [13] Conclusion - SJM is in a rebuilding phase, focusing on long-term growth through portfolio reshaping, while POST is growing through strategic pricing and disciplined execution [16] - In the current inflation-sensitive market, POST is viewed as the safer and smarter investment choice [16]

Group 1: Lululemon Athletica - Lululemon's stock fell over 20% in a single trading day in June, ending the month down 25% [3][4] - Same-store sales grew by only 1% year over year, and operating margin decreased by 110 basis points to 18.5% [4] - The company reduced its earnings outlook for the full year by nearly 25% to $14.68 per share at the midpoint, while reaffirming sales growth guidance of 7% to 8% [4][5] - Lululemon is raising prices and diversifying sourcing channels to mitigate tariff impacts, with 75% of revenue coming from the Americas [5] - After the decline, Lululemon's stock is trading at a price-to-earnings (P/E) ratio of 16, less than half its five-year average P/E [5] Group 2: J.M. Smucker - J.M. Smucker's stock dropped 12.8% to a 52-week low of $93.30 per share in June, following a 3% decline in sales and a 13% decline in adjusted earnings per share (EPS) for Q4 of fiscal 2025 [6] - The decline was attributed to low demand for dog snacks and sweet baked goods, recent divestment of pet food brands, and rising costs [6] - Smucker anticipates total sales growth of only 2% to 4% in fiscal 2026, down from 7% last year, with adjusted EPS expected to fall by 11% [6] - Despite challenges, Smucker's Uncrustables brand reported double-digit sales growth in Q4 and is nearing $1 billion in sales [7] - The company is taking decisive actions to revive its sweet baked segment, which has struggled since acquiring Hostess Brands in 2023 [8]

Group 1: Company Overview - The J. M. Smucker Company (SJM) is facing challenges entering fiscal 2026, with gross margin pressures due to cost inflation, unfavorable product mix, and soft volumes [1] - In Q4 of fiscal 2025, SJM reported a 9% year-over-year decline in adjusted gross profit and an 8% drop in adjusted operating income, primarily due to higher costs and reduced sales volume [1][8] Group 2: Financial Forecast - SJM expects the fiscal 2026 adjusted gross profit margin to be between 35.5% and 36%, influenced by elevated commodity and manufacturing costs, as well as negative volume/mix [2] - The company anticipates a 3% year-over-year increase in selling, distribution, and administrative expenses in fiscal 2026, driven by higher marketing investments for key growth brands [3] Group 3: Strategic Focus - SJM is focusing on brand investment and operational efficiency to overcome margin pressures, which will require disciplined cost control and sustained consumer demand [4] - The total marketing spend is projected to reach 5.7% of net sales, an increase of 30 basis points from the previous year, aimed at supporting brands like Cafe Bustelo and Uncrustables [3][8] Group 4: Industry Context - SJM's peers, such as Conagra Brands and Lamb Weston, are also managing inflationary pressures and shifting consumer demand, with Conagra facing a 389 basis point decline in adjusted gross margin due to elevated costs [5] - Lamb Weston reported a 9% global volume growth while executing over 30 strategic projects, despite a 5% decline in price/mix due to pricing adjustments [6] Group 5: Stock Performance and Valuation - SJM shares have decreased by 5.5% over the past year, contrasting with the industry's growth of 3.1% [7] - The company trades at a forward price-to-earnings ratio of 11.06X, below the industry average of 16.01X [10]

Core Viewpoint - J.M. Smucker's stock has significantly declined following its fourth-quarter fiscal 2025 results and updated fiscal 2026 guidance, presenting a potential buying opportunity due to its high-yield dividend and attractive valuation [1][2]. Financial Performance - Net sales decreased by 3% year over year in Q4, but increased by 7% for the full fiscal year [4] - Adjusted earnings per share (EPS) rose by 2% to $10.12, with fiscal 2026 guidance expecting net sales growth of 2% to 4% and adjusted EPS to decline to between $8.50 and $9.50 [4] - Free cash flow (FCF) for fiscal 2025 was $816.6 million, covering $455.4 million in dividend payments, with expectations for FCF to rise to $875 million in fiscal 2026 [10][11] Pricing Strategy and Market Conditions - The company is facing record-high green coffee production costs, leading to planned price increases in May and August [5][6] - Price increases have been implemented across various product lines, including Uncrustables, which saw its first price hike in over three years [7] - The Sweet Baked Snacks segment, which includes Hostess, has underperformed, with net sales down 26% year over year [9] Dividend Stability - J.M. Smucker has raised its dividend for 29 consecutive years, with a current yield of 4.6% due to the stock sell-off [11] - The company has a free cash flow yield of 6.5%, indicating strong potential to support its dividend payments [12] Valuation Metrics - The forward price-to-FCF ratio is 11.5, and the forward price-to-earnings ratio is 10.5, suggesting the stock is undervalued compared to historical averages [13][14] - The company's market cap has fallen to $10.05 billion, with the Sweet Baked Snacks segment contributing only 12% of total net sales [9] Investment Opportunity - Despite the challenges, J.M. Smucker continues to generate substantial free cash flow and offers a reliable dividend, making it an attractive investment for the second half of 2025 [19]

Company Overview - JM Smucker (SJM) is an Ohio-based company known for coffee (Folgers) and peanut butter and jelly products [8] - The company acquired Hostess about two years ago [3] Financial Performance & Valuation - The stock was down $16, with 105-106 million shares outstanding [4] - The stock price is $94 [4] - The company has a $1 billion product line that is growing substantially [4] - Current year earnings are projected at $850 million, below street estimates [5] - The company paid $55 billion (55 * 10^9) for the Hostess acquisition [6] - Potential for $12 in earnings if coffee pricing improves, Uncrustables continue to grow, and debt is reduced [6] Challenges & Risks - The company faces headwinds from GLP drugs and other trends [3] - The Hostess acquisition timing was not ideal, and the price was high [6][8] - Cash flow barely covers interest expense related to the acquisition [6] Opportunities & Outlook - Uncrustables (peanut butter and jelly sandwiches) are a key product [1][4][6] - There is an opportunity to reprice their coffee products [6] - Despite a recent misstep, the company has a history of successful ventures [7] - The current stock price presents a buying opportunity for long-term investors [8]

Financial Data and Key Metrics Changes - The company expects adjusted earnings per share (EPS) to be lower year over year at the midpoint, with a guidance range of $9, impacted by $0.80 from coffee inflation and $0.25 from tariffs [8][10][60] - Free cash flow for FY 2025 was reported at $817 million, approximately $100 million below expectations, primarily due to green coffee inflation and higher inventory balances [99] Business Line Data and Key Metrics Changes - The Sweet Baked Snacks segment is expected to see a decline in segment profit, contributing an additional $0.20 impact to EPS guidance [10] - The coffee segment is projected to have around 20% net pricing factored into the FY 2026 outlook, with a negative 10% volume impact due to price elasticity [13][35] Market Data and Key Metrics Changes - The company has observed a strong performance in the coffee portfolio, particularly with brands like Cafe Bustelo and Dunkin', which have stabilized due to normalized pricing [43] - The pet portfolio experienced a $20 million impact from inventory destocking at certain retailers, but overall momentum remains strong [93] Company Strategy and Development Direction - The company is focusing on optimizing its portfolio and investing in core brands like Donuts and Cupcakes to drive growth [20][21] - A strategic shift has been made to strengthen the core brands and improve execution through dedicated sales forces and streamlined operations [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the need for cautious guidance due to external factors impacting profitability, including coffee inflation and tariffs [10][60] - The company remains optimistic about future growth opportunities, particularly through key growth platforms and brand building efforts [102] Other Important Information - The long-term growth rate for the Sweet Baked Snacks portfolio has been revised from 4% to 3%, reflecting a more conservative outlook based on category performance [31] - The company plans to address tariff impacts through pricing strategies and cost management efforts [53] Q&A Session Summary Question: Impact of higher green coffee costs on EPS growth - Management confirmed that higher green coffee costs and tariffs have significantly impacted EPS guidance, leading to a more subdued outlook [8][10] Question: Details on Hostess SKU and display rationalizations - Management emphasized the focus on core brands like Donuts and Cupcakes, indicating a need to optimize the portfolio for growth [19][20] Question: Pricing strategy for coffee segment - The company is implementing pricing across the entire coffee portfolio, with a significant focus on green coffee pricing [35] Question: Expectations for Sweet Baked Snacks performance - Management expects improvement in the Sweet Baked Snacks portfolio in the back half of the year due to stabilization efforts and easier comparisons [36][38] Question: Free cash flow guidance for FY 2026 - The company anticipates free cash flow of $875 million for FY 2026, driven by lower capital expenditures and effective working capital management [99][100]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share (EPS) guidance for fiscal year 2026 at the midpoint of $9, which reflects a decline year-over-year when excluding impacts from coffee inflation and tariffs [10][32] - The adjusted EPS was impacted by $0.80 from green coffee inflation and $0.25 from tariffs, indicating a cautious outlook for the upcoming fiscal year [10][32] Business Line Data and Key Metrics Changes - The Sweet Baked Snacks segment is expected to see a decline in segment profit on a comparable basis, contributing an additional $0.20 impact to the adjusted EPS [11] - The company is focusing on core brands like Donuts and Cupcakes for growth, emphasizing the need for innovation and marketing investments in these areas [20][22] Market Data and Key Metrics Changes - The coffee segment is experiencing a net pricing increase of around 20% for fiscal year 2026, with a negative volume impact of approximately 10% due to price elasticity of demand [14][37] - The away-from-home coffee business is expected to see high single-digit pricing increases, indicating a strong focus on recovering costs in this segment [29] Company Strategy and Development Direction - The company is committed to investing in key growth platforms, particularly around brands like Cafe Bustelo and Uncrustables, to support long-term growth [10][102] - A strategic focus on optimizing the portfolio and enhancing brand building efforts is emphasized, particularly in the Sweet Baked Snacks and coffee segments [22][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the importance of ongoing marketing investments to support growth platforms and indicated a cautious approach to guidance due to external factors impacting profitability [11][62] - The company remains optimistic about stabilizing the Hostess brand and believes that focusing on core products will drive future growth [25][80] Other Important Information - The company reported free cash flow of $817 million for fiscal year 2025, which was below expectations due to higher inventory balances and green coffee inflation [99] - Fiscal year 2026 free cash flow guidance is set at $875 million, with expectations of improved management of working capital and lower capital expenditures [99] Q&A Session Summary Question: Impact of higher green coffee costs on EPS growth - Management confirmed that higher green coffee costs and tariffs have significantly impacted the EPS outlook, leading to a more subdued forecast for fiscal year 2026 [10][32] Question: Details on SKU and display rationalizations for Hostess - Management indicated a focus on core brands like Donuts and Cupcakes, emphasizing the need for clarity and optimization in the product portfolio [20][22] Question: Pricing strategy for the coffee segment - The company is implementing pricing across the entire coffee portfolio, with a significant focus on recovering costs associated with green coffee inflation and tariffs [37] Question: Long-term growth outlook for Hostess - The long-term growth rate for the Sweet Baked Snacks portfolio has been revised from 4% to 3%, reflecting a more cautious outlook based on category performance [32] Question: Free cash flow guidance and debt management - Management outlined that the anticipated free cash flow for fiscal year 2026 will be used for debt paydown and dividend payments, with a combination of generated cash and excess cash from the balance sheet [99]